***All definitions provided in this section are from "Bankruptcy and Debtor/Creditor, 7th Edition. Brian Blum and Samir Parikh. Wolters Kluwer.***
Abandonment- In relation to estate property, abandonment is the trustees relinquishment of estate property that is burdensome to the estate or of inconsequential value or benefit to the estate (§554). In relation to the the debtor's homestead, abandonment is the debtor's permanent termination of residence in the property, so that it no longer qualifies as an exemption.
Absolute Priority Rule- In a Ch. 11 case, it is the principle that in a crackdown confirmation, no junior class of claims or interest may receive anything of value from the estate unless a more senior non accepting class of unsecured claims or interests is paid in full (§1129(b)(2)(B) and (C)).
Abstention- The court's dismissal or suspension of a bankruptcy case, or its refusal to entertain related proceedings, on grounds, of fairness or in deference to another court (§305; 28 U.S.C §1334(c)).
Acceleration- The termination of the debtors right to pay a debt in installments or at a future maturity date, so that the debt becomes immediately payable. The payment of a debt may be accelerated under an acceleration clause in a contract upon the happening of a specified event, usually the debtor's default.
Acceptance of a Ch.11 plan- The determination, by a majority vote of the members of a class of claims or interests, to acquiesce in a proposed Ch. 11 plan (§1126).
Account, or an account receivable- A right of payment for goods sold or services rendered.
Adequate Protection- If the estate retains property in which a person other than the debtor has an interest, that interest is entitled to adequate protection. That is, the value of the interest must be maintains during the period of retention, so that is the interest is ultimately foreclosed, the holder will receive no less than would have been received had the property been surrendered or liquidates immediately (§3361, 363, and 364).
Administrative expenses- expenses incurred by the trustee or debtor in possession in the conduct of the estate's affairs or the preservation of its property. If allowed under §503, these expenses are paid as a second priority under §507.
Adversary proceeding- Litigation in the bankruptcy case that is required by Rule 7001 to take the form of a civil suit, initiated by complaint; a full civil lawsuit within the bankruptcy case.
After-acquired collateral- Property acquired by the debtor that, by contract or operation of law, automatically becomes subject to a lien created in advance of the debtor's acquisition of the property. (See also "Floating Lien").
Allowed claim- A claim that is accepted as owing by the estate under §502 either because it is not objected to or because the court has upheld it following a hearing on the objection.
Antecedent debt- A debt due by the debtor that arose before the debtor made a transfer to the creditor in respect of the debt.
Anti-assignment provision- A provision in a contract or in law that prohibits the transfer of rights or the delegation of duties by the original holder of those rights and duties.
Artisan's or Repairer's Lien- A common law lien (now codified in many states) that may be asserted in personal property by a person who has repaired or improved it. The lien secures the agreed and reasonable const of the work performed. In common law, it must be perfected by possession, but a statutory alternative of perfection by filing may be available depending on the state laws.
Assignment for the benefit of creditors- An insolvency procedure under state law which the debtor makes a voluntary transfer of property in trust to another person (the assignee), with instructions to liquidate the property and distribute its proceeds to creditors who have elected to participate.
Assignment of contract- Assignment is the transfer of rights under a contract. The transfer of contractual duties is called a "delegation." However, "assignment" is often used to mean a transfer of both rights and duties by one of the parties to a contract. It is used in this sense in £365, which empowers the trustee to assume executory contracts of the debtor and then to realize its value by assigning (i.e. selling) the debtor's package of rights and obligations to a third party. (See also "Assumption of contract").
Assumption of contract- The estate's adoption of an executory contract entered into by the debtor prior to bankruptcy, so that the estate is substituted for the debtor as party to the contract (§365).
Attachment of lien- Attachment is the creation of the lien, valid and enforceable as between the lien holder and the debtor. (Once the lien becomes effective against third parties as well, it is "perfected").
Attachment remedy and lien- The prejudgment remedy of attachment is the sheriff's seizure and retention of property of the defendant pending final resolution of the case. Upon attachment, the creditor obtains an attachment lien on the property that has been seized. This judicial lien secures the plaintiff's claim while the case is pending. If the plaintiff ultimately obtains judgment, the plaintiff has the right to sell the property in execution to satisfy the judgment.
Automatic perfection- The perfection of a lien immediately upon its attachment, without the need for any further action by lienholder.
Automatic Stay- The injunction that arises by operation of law, without the need for a court order, immediately upon the filing of a bankruptcy petition. The stay bars creditor from initiating or continuing with efforts to collect to enforce prepetition secured or unsecured debts, or to enforce repetition claims against the estate property or the debtor's property (§362).
Avoidance- Avoidance is the overturning of a debt or obligation. In bankruptcy, the trustee has the power under §§544 or 553 to avoid certain repetition dispositions or obligation of the debtor, as well as certain unauthorized post petition dispositions of estate property. The debtor has the right under §522(f) to avoid specified interests to the extent that they impair qualified exemptions in property.
Backdating- Upon timely completion of the prescribed act of perfection, some liens are given retrospective effect so that their priority will date from some specified earlier time.
Badges of fraud- Suspicious circumstances leading to the inference that a transfer made by the debtor was motivated by the actual intent to defraud creditors.
Balance sheet test- See Insolvency.
Bankruptcy Appellate Panel (BAP)- A court, consisting of three bankruptcy judges, established in some circuits to hear appeals from bankruptcy courts.
Bankruptcy test- See Insolvency.
BAPCPA- The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which made significant amendments to the code (the "Means Test" being one of the larger).
Best interests test- One of the standards for plan confirmation, which requires that the total amount to be paid on a claim under the plan has a present value at least equal to what the claimant would have received had the estate been liquidates under Ch. 7. The requirement of present value is intended to compensate the claimant for having to await distribution over time instead of reaching immediate payment upon liquidation of the estate. The present value of the distribution is determined by adding interest at the market rate to the face value of the hypothetical Ch.7 payment (§§1129(a)(7), 1125(a)(4), and 1325(a)(4)).
Bona fide Purchaser (BFP)- A person who, in a consensual transaction, acquires rights in property in good faith for value and without actual or constructive notice that the purchase violates rights in property held by a person other than the transferor.
Business judgment rule- A standard court approval of a business decision (such as a trustee's decision to assume or reject an executory contract) under which the court declines to interfere with decision of it was made (1) in good faith; (2) in the best interests of the company or the bankruptcy estate; (3) after a reasonable investigation; and (4) by an individual not interested in the subject issue.